National Australia Bank Chiefs to Resign in Wake of Damaging Report

Andrew Thorburn, the chief executive of National Australia Bank, was singled out by the author of a report on malpractice within Australia’s financial industry.CreditCreditEdgar Su/Reuters

By Jamie Tarabay

Feb. 7, 2019

SYDNEY, Australia — The two top executives at one of Australia’s largest banks will depart after a damning report on misconduct in the country’s financial industry singled them out for their resistance to changing how they do business.

National Australia Bank said on Thursday that Andrew Thorburn, its chief executive, and Ken Henry, its chairman, would soon resign from the company. The bank cited the report issued on Monday by an Australian royal commission that castigated the industry for putting profit ahead of its customers and called for tougher regulations and accountability.

The report recounted moments during months of public hearings and submissions in which Mr. Thorburn dismissed systems failures that might have cost his customers over 100 million Australian dollars, or $71 million, as “carelessness.”

“Having heard from both the C.E.O., Mr. Thorburn, and the chair, Dr. Henry, I am not as confident as I would wish to be that the lessons of the past have been learned,” Kenneth Hayne, who led the commission that investigated questionable financial industries practices, wrote in the Monday report.

“More particularly, I was not persuaded that N.A.B. is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly,” he said, referring to National Australia Bank.

Dr. Henry, he said, “seemed unwilling to accept any criticism of how the board had dealt with some issues.”

The report issued Monday was not as far-reaching as some critics had hoped. It will largely leave in place the grip that four big banks, including National Australia Bank, have on the country’s banking system. That concentration of power has led to higher costs for consumers, according to a recent Australian government report.

Even if the Australian government follows through on its pledge to “act on” Mr. Hayne’s recommendations, it has little time to do so. The government must hand down a federal budget in early April, then faces major elections in May.

Still, the departures could help National Australia Bank fix its practices and restore its reputation, said Richard Holden, an economics professor at the University of New South Wales.

“It gives the bank a reset and a fresh start,” said Mr. Holden, though he noted that after Mr. Hayne’s report, “they had no real option.”

Whether the removal of the two executives results in an effective new start depends on who replaces them, he said, citing a need for “strong and serious” leaders.

In its statement, National Australia Bank and the two departing executives acknowledged the role the report had played in their resignations.

“I acknowledge that the bank has sustained damage as a result of its past practices and comments in the royal commission’s final report about them,” Mr. Thorburn said in the statement from the bank. “As C.E.O., I understand accountability. I have always sought to act in the best interests of the bank and customers, and I know that I have always acted with integrity. However, I recognize there is a desire for change.”

Mr. Thorburn will leave at the end of the month, the bank said, while Dr. Henry will retire once a permanent successor has been named.

“I am enormously proud of what the bank has achieved and equally disappointed about what the royal commission has brought to light in areas where we have not met customer expectations,” Dr. Henry said in the company statement.

National Australia Bank in particular could face pressure to prove it can change its ways. In his report, Mr. Hayne wrote that the bank “stands apart” in its reaction to allegations of damaging industry practices.

“Over all,” Mr. Hayne added, “my fear — that there may be a wide gap between the public face N.A.B. seeks to show and what it does in practice — remains.”

Isabella Kwai contributed reporting.

A version of this article appears in print on , on Page B4 of the New York edition with the headline: In Australia, Bank Chiefs Will Resign Over Report. Order Reprints | Today’s Paper | Subscribe